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ETFs are Index Funds
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An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex.
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They are listed and traded on exchanges like stocks.
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They enable investors to gain broad exposure to entire stock markets in different Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing.
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ETFs trading value is based on the net asset value of the underlying stocks that it represents
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They are similar to mutual funds in a certain manner but are more liquid as they can be sold quickly on stock exchanges like shares.
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Their price changes daily as they are traded throughout day.
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ETF route is considered as safer mode of investment as it shields investors against stock market volatility.
Why in news?
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Finance Ministry has launched Bharat 22, an ETF. Bharat 22 comprise of 22 stocks including those of central public sector enterprises (CPSEs), public sector banks (PSBs) and its holdings under the Specified Undertaking of Unit Trust of India (SUUTI).
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Second tranche of Bharat 22 ETF was oversubscribed 2.57 times.